Automate your savings
The usual finance advice to save money is to automate your savings.
Automating your savings means requesting your bank to automatically transfer a certain amount of money from your payroll account (with said bank) to another account* (with same bank) where you keep your savings. This way, you never see the balance anymore once you withdraw your salary, thereby eliminating any temptation to spend more.
Out of sight out of mind
The typical Pinoy millenial acts like a one-day millionaire every pay day, only to live like a rat towards the end of the kinsenas (15 day payday period). But if you don’t see your money in your salary balance, you probably won’t be spending it would you?
The automatic transfer ensures that you allocate savings first, or as they say, you pay yourself first before spending. You ensure that every payday you uphold the following formula:
But what if your payroll bank doesn’t do automatic transfer? Or what if your savings account is with another bank?
As far as I know, there are no Philippine banks that are capable of doing an automatic interbank transfer. It just isn’t done and it’s terribly inconvenient.
In order to simulate as much as possible the out of sight out of mind style of automatic transfer, I go the old fashioned route.
Every payday, the first thing I do is manually deposit the savings to my savings account / investment account. My payroll, savings and investment accounts are held in different banks so there’s no way for me to do an automatic debit / transfer. I physically go to a brick and mortar bank and manually do the transactions. It’s time consuming but it’s fun and gives a sense of satisfaction, similar to that of shopping! Haha.
It can be tedious, especially when the amounts I deposit are small. But I’ve learned that slow and steady wins! Look at your bank balance a few months / years down the line and you’ll probably learn that you’ve reached a million!
Spend only what’s left
Once the money for savings is out of sight, it is out of mind and you’re left to spend only what’s left. As a cash-only person, this holds true for me. There is no plastic or credit card cushion (except well, your emergency fund). The cash that’s left is allocated to utilities and any other items in the budget.
As a shopping enthusiast, it feels so freeing to know I have the freedom to spend, but within limits of course! With my savings already safely kept away, I can safely browse the stores. That reminds me, it’s time to go window shopping! Hehe
Till next time!
*Note that with one bank (BPI save up account), this second savings account is restricted . As in you’re restricted from withdrawals! If you do withdraw, fees are imposed on your account. So there really is great incentive for you not to touch your account.
I’m not updated on BPI’s policies though, they may have changed now.